Joint Venture: Proportionate Consolidation Method & Equity Method

Formation of a partnership and the formation of a corporation have varying procedures and difficulties associated with them.

Over the years, there are many controversies over equity method within IAS 28 Investments in Associates and Joint Ventures. The controversies basically lay on the vagueness of application on equity method; whether it serves as one-line consolidation (consolidation technique), measurement basis or a mixture of both. This paper divides into 3 parts. First part gives an illustration on this accounting issue in IAS 28 as well as the explanation, second part compares and contrasts the financial reports of two assigned entities and the final part discusses the qualitative characteristics of their financial reports.

While using debt may add pressure to a company’s ongoing operations as a result of having to meet interest-payment obligations, it helps retain more profits within the company compared to using equity, which requires the sharing of company profits with equity holders. Using debt, companies need to pay only the amount of interest out of their profits. Using equity, on the other hand, the more profits a company makes, the more it has to share with equity investors. To take advantage of such a debt-financing feature, companies often use debt to finance stable business operations in which they can more easily make ongoing interest payments and, meanwhile, retain the rest of the profits to themselves.

For Heart, the ‘digestibility ‘of the targeted assets, itself a function of the size and organizational structure of the firm that owns them, is the crucial determinant of the choice between joint ventures and acquisitions (Hennart S. , 1997). Digestibility is also a determinant of the choice that is made when firms are not sure whether to choose joint ventures or acquisitions. while Balakrishnan and Koza are concerned with transaction costs in the market for firms, Heart's focus is on the costs of integrating the target firm’s labor force (what has been called the post-acquisition integration problem). (Hennart S. , 1997)The understanding of the choice between joint venture and acquisition allows us to understand how the logical decision can be made.

Study Objectives 1. Identify the characteristics of the partnership form of business organization. 2. Explain the accounting entries for the formation of a partnership. 3. Identify the bases for dividing net income or net loss. 4. Describe the form and content of partnership financial statements. 5. Explain the effects of the entries to record the liquidation of a partnership. *6. Explain the effects of the entries when a new partner is admitted. *7. Describe the effects of the entries when a partner withdraws from the firm.

Due to a variety of uncertainties ranging from the instability of Mexico’s economy, to a limited knowledge of the possible company to do business with, Charles River Laboratories have to assure to their stakeholders that a joint venture with ALPES is beneficial to the growth of the company.

Endenich, Hoffjan, Schlichting and Trapp (2016) found that international companies tend to have harmonious accounting policies when it comes to subsidiaries. There is a growing awareness about the need for a global accounting system, and this has had an effect of making

Accounting for Business Combinations and its relevant issues under the requirements of Australian standards have raised a considerable number of concerns, and therefore remained controversial for both accountants and scholars who have been struggling to deal with the practical – and – theoretical development of the Accounting industry. Regardless of such difficulties, due to the undeniable meaning of Accounting practices and the enormity of transactions involved on a daily basis, it is of great importance to research, study and understand the application of Business combination Accounting according to Australian requirements.

Ring the Bell company faces fierce competition in this market since Ring the Bell is relatively a newly established company. Its competitors include local delivery company---On the Way and Food Solution. In addition, Serve your meal may also be included.

A joint venture (JV) can be mean by, an enterprise, co-operation or partnership that formed by two or more companies, individuals or organizations. However, there must be at least one of the parties working as an operating entity that wishes to broaden its activities for the purpose of conducting a new, profit motivated business of permanent duration. In general, the ownership, profit and risk are shared by every parties or participants in joint venture with more or less equal equity distribution and without absolute dominance by one party.

It means a new and independent company that form by two existing companies’ collaboration (William, C 2014). That means both of them have to share the risk they face and pay off their responsibilities together. Joint Venture brings advantages to the small local business. The joint venture usually involve between a big company and small local businesses. This is because the small local business can gain a lot of advantages from the big company, such as the experience and opinion from the senior to avoid. Small businesses have an advantage of obtaining from the larger company which will share the financial burden through the implementation of the new venture. For example, MMC Corporation joint venture with Gamuda Berhad in the project of building the MRT 2 that worth up to approximately RM15bil. In this joint venture of the two big companies are able to share the risk they face and pay off their responsibilities together. Not only that, skills may be insufficient if only one company takes the job but if two or more companies joint venture then they will be gaining access to expertise without the need to hire more expertise in the field required. However, the problems in ownership and leadership may occur to the joint venture too. Every advantage comes with a disadvantage , in a business joint venture like MMC Corporation and Gamuda Berhad, one company may set

The company aims of partnership is to achieve sufficient profit from its business operations and to keep the business vitality, to account the continued development and to distribution of a share of those profits each year for its members, and enable them to carry out other activities consistent with the purpose of it in the

Since the firms are not perfect substitutes, Modigliani and Miller have derived two basic propositions regarding relationship of the firm’s value and capital structure. The first proposition was introduced and known as Proposition I. Proposition I claimed that investment decisions are independent of its capital structure. The average cost of capital will be equivalent to its capitalization rate of pure income of its own class. It means that firm cannot change their cost of their capital by either adding or reducing the financial structure. This means than any changes in the cost of capital will not have any effect on the financial structure. However, in any cases if Proposition I does not hold, firm have the ability to put any equivalent leverage for themselves by borrowing using their personal account. Therefore, in order to prevent it from taking place, value of levered firm and value of unlevered firm should be equivalent to each other. there should be no different between levered and unlevered firm.

This paper figures out IJV structure and mechanisms such as principal agency problems and hold–up problem in International Joint Ventures. Thereby it is appropriated to examine the relationship between the parental firms, and how they can elaborate the operation of the Board of Directors and the Joint Venture managers. This refers to an organization of

A company can secure large capital compared to a sole trader or partnership. A joint stock company has widespread appeal to the investors of all the types. Its capital is divided into shares of small value so that the people with limited means can also buy them. There is no limit on the number of shareholders in a public company. In addition, a company can borrow from banks to a large extent due to its high credit standing and also issue debentures to public